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Probe expands { July 1 2002 } Original Source Link: (May no longer be active)    http://www.washingtonpost.com/wp-dyn/articles/A7249-2002Jul1.html http://www.washingtonpost.com/wp-dyn/articles/A7249-2002Jul1.html WorldCom Internal Accounting Probe Expands By Washington Post Staff Writers Monday, July 1, 2002; 1:20 PM WorldCom Inc., which announced last week that it would have to restate earnings for 2001 and part of 2002, informed the Securities and Exchange Commission this morning that an internal investigation has now raised questions about the company's books as far back as 1999. WorldCom said it is has requested the assistance of its new auditor KPMG LLP in the review of 1999 and 2000 accounting. "In particular, questions have been raised regarding certain material reversals of reserve accounts during 2000 and 1999," WorldCom said in the sworn document signed by general counsel Michael H. Salsbury. "Today's filing is consistent with our pledge to be forthright and open, and to cooperate fully with both internal and external investigations," said WorldCom president and chief executive John Sidgmore. The statement was made in response to a demand by the SEC that it answer questions surrounding its extraordinary announcement last week that it had improperly accounted for $3.9 billion during 2001 and the first quarter of 2002. Worldcom shares, which had traded at more than $60 a share in 1999, were trading at 7 cents this morning. The Nasdaq Stock Market this morning informed the company that its shares would be removed from trading starting Friday. WorldCom disclosed Tuesday that it had improperly accounted for $3.9 billion since early 2001. Within a day, the Securities and Exchange Commission slapped the Clinton, Miss., firm with civil fraud charges. Two congressional committees and prosecutors in New York and Jackson, Miss., are investigating the company. Last week, the SEC directed WorldCom "to file, under oath, a detailed report of the circumstances and specifics" of the events leading to the company's announcement that it would restate earnings for all of 2001 and the first three months of this year. Today's report is separate from an internal investigation being conducted for WorldCom's board of directors by former SEC enforcement chief William McLucas. That effort could last several weeks. WorldCom, which had been audited by Arthur Andersen, recently switched to KPMG. KPMG hired some members of the team that had audited WorldCom for Andersen, according to a former Andersen accountant. WorldCom's allegedly fraudulent accounting involved counting the cost of leasing telecommunications lines as if they were capital investments. Unlike operating expenses, which are booked as they are incurred, capital expenses are deducted from profits in increments over an extended period, which dilutes their impact on the bottom line. A source familiar with the situation said the expenses were spread across multiple accounting categories in a way that was not readily apparent. WorldCom laid the blame for the misstatements on its former chief financial officer Scott Sullivan and former comptroller David F. Myers. Sullivan was fired and Myers was asked to resign last week. Today's filing from WorldCom comes just three days after Xerox Corp. announced that accounting errors forced it to restate $6.4 billion in revenue for the past five years, more than twice the $3 billion anticipated three months ago when the company settled fraud charges with the SEC. And accounting scandals have embroiled other corporate giants including Andersen, which was convicted for its role in the Enron Corp. case; ImClone Systems and Tyco International Ltd., which have had their former chief executive indicted. © 2002 The Washington Post Company

Acquisitions { August 8 2002 } Cfo indicted { August 28 2002 } Ebbers exchief of worldcom is indicted on federal charges { March 2 2004 } Mci att dispute over calling fraud Misteps since 99 { July 2 2002 } Moving hq name mci { April 15 2003 } Outside directors pay 54 million to settling class action Probe expands { July 1 2002 } Wordcom chapter Worldcom bankruptcy Worldcom bbc { June 27 2002 } Worldcom chief given 25 years for huge fraud { July 14 2005 } Worldcom enabled huge fraud { June 10 2003 } Worldcom msnbc Worldcom ny { June 26 2002 } Worldcom pay 500m fine { May 19 2003 } Worldcom [jpg] Files Listed: 17

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